Breaking News: EEOC Issues New Retiree Health Insurance Rule

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January 2, 2008

The Equal Opportunity Commission (EEOC or Commission) enforces the Age Discrimination in Employment Act (ADEA), which prohibits age discrimination in all aspects of employment. The Commission has approved a rule that allows employers to coordinate health benefits they offer to retirees with Medicare (or comparable state health benefits) without violating the ADEA.
The rule was needed because in 2000, in Erie County Retirees Association v. County of Erie, 220 F.3d 193 (3d Cir. 2000), a federal court ruled that if an employer provides retiree health benefits, the ADEA requires the health insurance benefits received by Medicare-eligible retirees be the same, or cost the same, as the health insurance benefits received by younger retirees. After the EEOC adopted this interpretation of the ADEA as its enforcement position, labor organizations, employers, and state and local governments argued that it was contrary to existing practice, and that if they were forced to ensure that Medicare-eligible retirees received benefits identical to those of younger retirees, they would comply by reducing or eliminating the retiree health benefits that they currently provide. In fact, that is what happened when the Erie County case was settled in March 2002 – the County’s plan gives older retirees that same benefit they had prior to the litigation, but requires younger retirees to pay more for health benefits that offer fewer choices.
 
Groups asking the Commission to reverse the effect of Erie County and preserve the current practice included, for example, the AFL/CIO, representing 13 million workers; the American Federation of Teachers, representing 1.2 million workers; the American Association of Health Plans representing more than 1,000 plans that cover approximately 160 million Americans; and the Chamber of Commerce of the United States, representing more than 3 million businesses.
 
The new rule ensures that the Erie County decision does not induce unions, state and local governments, and employers to cut back or eliminate their retiree health benefit programs. The new rule allows employers who provide retiree health benefits to continue the practice of coordinating those benefits with Medicare without ensuring that Medicare-eligible retirees are receiving the same benefits as younger retirees. Some employers coordinate with Medicare by supplementing the Medicare benefit; others simply provide retirees under age 65 with health insurance to “bridge” the gap between the time they retire and the time they become eligible for Medicare. The rule allows retirees to continue receiving the benefits they currently enjoy. The rule also allows unions to negotiate for health benefits that coordinate with Medicare. The new rule went into effect when it was published in the Federal Register on December 26, 2007. A copy of the rule is available on the Commission’s Web site at http://www.eeoc.gov/policy/docs/qanda_retireehealthrule.html.
If you have questions regarding the above, please contact any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.

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